“Am I right that, under the SNP proposals, a hard-working nurse would pay the tax, but that, for example, a comfortably off man with a nice little portfolio of shares who received a dividend income of, say, £20,000 a year … [h]e would not pay a penny of the SNP’s income tax on that dividend income. [who can she mean? see below] Is that fair?”

Salmond replied,

“We can safely conclude that all ministers in the Government would gladly pay local income tax because it would be based on people’s ability to pay. There is a huge difficulty in trying to charge investment income because of the costs of administration, which would be enormous.”

Goldie then landed her blow.

“Is the First Minister aware that within this Parliament—indeed, within his party and even his Government—there is a self-proclaimed expert on tax avoidance? During a debate on Tommy Sheridan’s plans for local taxation, no less a person than Mr Stewart Stevenson said:

“Here is how I would avoid the tax in total and pay not a penny.”—[Official Report, 1 February 2006; c 22919.]

“Indeed, Mr Stevenson’s speech in that debate was a master-class on tax avoidance. It is compelling reading for accountants.

“The truth is that wealthy individuals such as Mr Stevenson, who have substantial dividend income, will, as he said, “pay not a penny” of the SNP’s income tax on any of that dividend income. The First Minister says that that is fair; I think it stinks. There is hypocrisy at the heart of Government. “

Stevenson’s speech is indeed a masterclass in tax management and until very recently appeared in full on Stevenson’s blog. However, mysteriously this blog closed recently so a trawl through the Scottish Parliament website is necessary to get the full benefit of Stevenson’s mastery of the topic. Speaking during a debate on Tommy Sheridan’s bill to abolish council tax and replace it with a service tax, Stevenson was critical of the proposals (with some justification for the reasons he elucidates):

“Here is how I would avoid the tax in total and pay not a penny. Almost all members could do this. I would transfer my house to the sole ownership of my wife—that is all I would need to do. As long as her income was below £10,000 per year, she would pay no tax on the house. I would own no house, so I would pay no tax. It is that simple. Members do not need a high-powered accountant to advise them on that; I have just completed the task for them and what I have told them is all they need to know. Members might think that there are capital gains implications in doing what I have outlined, but if one is married or in a civil partnership there would be no capital gains implications in such a transfer. Lest they think that they would lose the right to live in that house, I tell members that the Matrimonial Homes (Family Protection) (Scotland) Act 1981 preserves that right. They would hold no title or real right to such property in the land register of Scotland or the register of sasines, nor would they be the beneficiary of a trust deed conferring rights to heritable property. If one was in a legal partnership with someone who earned less than £10,000 a year, it would be quite easy to avoid paying the tax.

“There is more. I direct members’ attention to my register of interests, where I say voluntarily that I am the owner of some 40,000 shares in the Bank of Scotland. They can look it up, so I will tell members that they are worth £14,000 a year to me in dividend payments. Even if I did not want to change the ownership of my house, I would have only to transfer the shares to my wife and I would eliminate the taxation on them. That would be worth a £540 reduction in my taxation each and every year under the bill.

“If I had £60,000 in unearned income, as many rich people do, and four kids and a wife, I could distribute my assets among them and pay no tax whatever.”

Stevenson’s speech was followed by John Swinburne, erstwhile MSP for the pensioners’ party. Swinburne, a pigeon fancier and Motherwell supporter, began,

“the previous speaker is obviously blinded by the exuberance of his own verbosity. However, he actually says little.”

5 Responses to Here is how I would avoid the tax in total and pay not a penny

Replacing Council Tax by LIT seems fair to me (and is a Lib Dem policy IIRC) so no wonder it’s not been used. Yes you could have people who are not registered in any borough so don’t pay tax in any of ’em, quite happy to style themselves the Count of No Address, but generally it would be fairer than taxing people on what they live in.

I agree (and support it) – the difficulty with it is that the Sheridan bill did not rely on income alone but homeownership too (the point Stevenson made in his speech – a perfectly valid one). However, the proposals by the SNP (and I’m not sure if this is Lib Dem policy too) would exclude investment income and require LIT to be taken at source – through PAYE – meaning it would only come on employment income or earned trading income. The irony is that the richest would probably end up paying less because they will often have investment income (and despite the requirement under tax law IIRC that Banks deduct tax at source and dividend income is also taxed at source with the recipient receiving net income – although Prudence made investment taxation so complex that I’m not sure if I’m right on this and am more than happy to be corrected.)

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